Download President Obama placed energy and climate change at

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President Obama’s energy program – A midterm review
President Obama has placed energy and the environment at the top of his second
term agenda. Near the mid-point of his second term, the Administration’s
progress has been notable, especially in comparison to progress in other areas
such as health care, immigration, and foreign affairs. In large measure the
success is due to the team he has assembled: Ernie Moniz, the capable and
energetic Secretary of Energy; John Podesta, senior White House councilor, the
David Ortiz of Democratic Party strategists; and the Administrator Gina McCarthy,
who has proven her ability to explain and advocate for the President’s climate
agenda. The focus has been on climate change, exploiting the unexpected plenty
of North American oil gas, and energy technology.
The President’s highest priority was for EPA to use its legal authority to set
regulations reducing the carbon dioxide emissions of existing electricity
generating power plants. In June the EPA released an unexpectedly thoughtful
and well supported plan setting state specific goals for reducing emissions chosen
from a menu of measures such as increased efficiency, emissions trading, and
fuel switching, mainly from coal to natural gas electricity generation. The CO2
projected reductions by 2020 of about 25% below 2005 levels are entirely
reasonable and should not significantly increase costs for consumers or industry.
It is, indeed, a modest plan, and I would argue that the projected 2030 target of
30% reduction could have been more ambitious.
Ironically, these regulations for reducing emissions from existing power plants are
more realistic than the regulations issued for new coal and natural gas power
plants that EPA justified by asserting that carbon capture and sequestration was
an “adequately demonstrated control technology,” which it certainly is not. But,
this assertion is of no consequence, since no one in the United States is planning
on building a new coal electricity generating plant in the foreseeable future.
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President Obama’s strategy of relying on legally sanctioned EPA regulations to
advance his agenda for CO2 appears to be succeeding. But, EPA may yet suffer
a backlash from the public that expects this agency to be a fair and capable
administrator of a policy endorsed by a majority of Congress, rather than the
promoter of a Presidential policy, no matter how meritorious, that does not, as yet,
command widespread public support.
The EPA regulations will strengthen the U.S. position in the complex international
climate negotiations that seek to reduce global greenhouse gas emissions.
However, few believe that mitigation of global emissions will be sufficient to avoid
disruptive climate change. Thus, the country needs a strategy and program for
adaptation to climate change. The President’s climate action plan takes a step in
this direction pointing to the need to improve the resiliency of the U.S.
infrastructure due to extreme climate events, such as Hurricane Sandy, a goal
which resonates with the public. But, climate science has not established a link
between massive hurricanes and climate change. How the world will adapt to the
economic disruption and possible conflict that will accompany climate change is
the unacknowledged elephant in the room.
The Administration has been slower to grasp the opportunities presented by the
North American unconventional oil and gas revolution. While recognizing the
tremendous benefits from lower oil and gas prices, more jobs, and reduced
imports, the Administration has not yet advanced specific proposals for allowing
the export of crude oil and condensates (ethane, propane, butane). Department
of Energy approvals for the export of liquefied natural gas proceed at a leisurely
pace. As a director of the only company granted an export license with a plant to
export LNG under construction, and a close observer of the supply of North
American unconventional gas, I find it fanciful to expect that a flood of new
petroleum exporting facilities will drive the domestic price of natural gas up over
the next couple of decades.
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Increased domestic production requires expanding the oil and gas distribution
infrastructure while continuing to reduce the significant environmental impact of
hydraulic fracturing. It seems likely that President Obama will take a dive on
deciding whether or not to approve the Keystone XL pipeline application. But this
unfortunately contentious issue should not stop the Administration from proposing
measures to extend and modernize the oil and gas distribution system. Ironically,
both safety and cost considerations point to pipelines rather than rail cars as the
preferred way to move petroleum products from production sites to market.
The greatest risk to significant expansion of U.S. oil and gas production is that
public concern about the environmental effects of hydraulic fracturing will lead to
banning the activity. The significant environmental impacts are on water quality,
air quality, community disruption, and induced seismicity. Incredibly, the EPA will
not begin the process of adopting regulatory guidelines for water management
until 2015. Moreover, there are serious tensions between the EPA and state
regulatory authorities, which have knowledge of local geological and operating
practices, as to the best way to craft and enforce regulations. In addition as
methane is a potent greenhouse gas, the President has properly emphasized the
importance of reducing methane emissions from all aspects of natural gas
production, storage, and distribution. Responsible exploitation of North American
unconventional oil and gas resources demands making progress on these
important environmental issues.
Industry well understands what is at stake here and is especially attentive to the
pending Colorado statewide referendum on granting local governments control
over oil and gas development as signal of broader national public sentiment about
hydraulic fracturing. Companies would be well advised to adopt, in advance of
regulation, a policy of transparency and a commitment to continuously reducing
the environmental impact of their operations.
President Obama’s support for new energy technology, begun under Energy
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Secretary Steven Chu in the first term is continuing under Ernie Moniz in the
second. The new “all the above strategy” implies that the Obama administration
will pursue all energy options equally, which is unlikely to displease any advocate.
The strategy makes sense as a declaration of intent to explore all technical
options that might meet the country’s energy future needs and to provide some
R&D support for these explorations. However it naively seems to suggest that
resources will be available to pursue all the costly pathways of demonstrating the
commercial viability of all options: clean coal, renewables, nuclear, and an
efficient and secure energy infrastructure.
Priorities need to reflect a realistic assessment of the government role. The first
priority should be substantial support for basic R&D is the first priority, because
the private sector does not have commercial justification to undertake studies that
may have long-term benefits they cannot capture. Some nearer term
technologies deserve government support, e.g. carbon sequestration, which is
essential to enable clean coal use. Other do not deserve government support
either because the technology is too expensive, e.g., nuclear power, or because
markets and technical progress have made the option commercially viable, e.g.,
grid-connected photovoltaics and many energy efficiency applications in industry
applications.
In sum, President Obama is having much greater success in advancing his
energy agenda in his second term than in in his first term. But, as we know it will
take more than one successful term to secure the country’s energy future. To
coin a phrase: one good term deserves another.
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